Oil prices rebounded for a second consecutive day, reversing some of last week’s losses as traders weighed concerns about potential supply disruptions from the Middle East and hopes for improved Chinese demand. The market remains highly volatile, driven by geopolitical uncertainties and fluctuating demand signals.
U.S. crude inventories rose by 1.64 million barrels, while gasoline and distillate stocks experienced significant drawdowns.
Oil prices are fluctuating amid uncertainty over Middle East tensions and the potential for surplus in global markets.
China’s economic stimulus raises hopes for demand recovery, but the market may face oversupply by 2025 barring disruptions.
Despite the rise in U.S. crude inventories by 1.64 million barrels—well above the 800,000-barrel expectation—key product inventories such as gasoline and distillates saw significant drawdowns. Gasoline stocks dropped by 2.02 million barrels compared to the expected decline of 1.3 million barrels, and distillate inventories fell by 1.48 million barrels, close to forecasts. Additionally, Cushing storage levels resumed drawdowns, decreasing by 216,000 barrels.
Oil prices are being driven by shifting expectations around a cease-fire in the Middle East and fears of an escalation that could disrupt regional crude flows. Brent crude’s recent $11 price range reflects the market's sensitivity to geopolitical risks. Traders are also contending with the transition to potential oversupply, which could push the market structure toward contango—a signal of excess inventories.
China, the world’s largest oil importer, has introduced economic stimulus measures to support growth, boosting demand prospects. However, analysts from ING caution that, barring supply disruptions, the market could return to a comfortable surplus through 2025. This suggests that even with geopolitical uncertainty, oil prices may face downward pressure in the longer term.
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